Marks Electrical continues share gain

Consumer appliances retailer Marks Electrical (LON: MRK) reported maintained pre-tax profit for last year despite higher costs and the overall weakness of the economy. It is gaining market share and the brand is becoming more widely known.

In the year to March 2023, revenues improved from £97.8m to £112.4m, while underlying pre-tax profit was flat at £6.4m. Gross margins edged down.  

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Overheads were higher partly due to the lack of Covid business rate relief, building up capacity and the costs of being quoted. Bringing installations in-house also affected operating margins. Advertising and marketing costs were maintained at 5% of revenues.

There was a sharp improvement in cash. Improved credit terms with suppliers helped to reduce working capital. Net cash rose from £3.9m to £10m. The total dividend is 0.96p a share.

The underlying market declined by 10% in the past year. That enabled Marks Electrical to increase its domestic appliances market share from 2% to 2.5% and raise its share of the consumer electronics market, which it entered more recently, from 0.4% to 0.6%. Marks Electrical is increasingly well known outside of its East Midlands base.

Free next day deliveries for purchases over £500 and installation services are helping to win customers.

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Revenues are growing at 30% in the first two months of this financial year. Canaccord Genuity forecasts a 2023-24 pre-tax profit of £7.1m, based on a 15% increase in revenues, which were edged up after the results. The broker believes that there is potential for upgrades alter in the year.

The share price improved by 2.75% to 93.5p. the prospective multiple is 18. Economies of scale will help profit to grow. There is potential for a faster rate of growth when the economy is in better shape.

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